Big Rookie Year: Breaking Down 2016’s Debut Buyout Funds by Kevin Dowd, PitchBook
So far this year, seven US-based private equity firms have raised first-time buyout funds exceeding $100 million in commitments, according to the PitchBook Platform, including three that topped the $350 million mark. That means it’s already been a bigger year for rookie vehicles than 2015, when no PE firm raised more than $350 million for a debut fund.
Raised by firms across five states—including two each in California and Texas—this year’s debut funds display surprising geographic diversity. They also range across a variety of mandates. Some funds invest in industrial businesses and others in software companies. Some focus exclusively in North America and others pursue deals all over the world. Some were raised by firms just getting off the ground, while others simply represent the first outside capital for firms that have been investing their own money for quite some time.
First, here’s a breakdown of the seven largest debut buyout funds closed in the US so far this year. After that, we’ll go one at a time to provide some more detail on the new (or new-ish) players on the private equity scene.
Debut Buyout Funds
AE Industrial Partners I, $680M
AE Industrial Partners (fka AeroEquity Partners) has been around since before the turn of the millennium, but this is the first time the firm has publicly raised a private equity fund. The vehicle, which AEI closed in April, exceeded its $600 million target and will be used to invest in the aerospace industry and other related sectors, including technical manufacturing and maintenance, repair and overhaul. In addition, the firm raised $160 million for co-investment vehicles, bringing total capital raised this year to $840 million.
CenterOak Equity Fund I, $420M
Founded by former executives of Brazos Private Equity Partners, CenterOak plans to use its debut fund to make control-oriented investments of between $20 million and $90 million in middle-market companies located in the US—mainly in the Southwest and South regions. The firm will focus specifically on the industrial, consumer and business services sectors. CenterOak had no trouble raising its debut vehicle, either, as the oversubscribed fund ended up blowing past its original target of $350 million toward an August close on its hard cap.
Insignia Capital Partners, $358M
Insignia’s first flagship fund will seek to make investments in North American lower-middle-market companies in the consumer, healthcare and business services sectors. The oversubscribed vehicle drew wide interest from LPs, logging commitments from more than 30 investors. This isn’t the first time getting a new PE firm up and running for founder David Lowe: He previously co-founded and worked for 13 years at Friedman Fleischer & Lowe.
Align Capital Partners Fund I, $325M
Operating out of both Cleveland and Dallas, Align plans to use its debut fund (which closed in September) to invest in lower-middle-market companies that have yet to strike it big, pursuing deals with targets that have less than $10 million in EBITDA. The vehicle closed on its hard cap after just five months of fundraising. In terms of sectors, the firm will focus on companies related to manufacturing, distribution and business services. All three of Align’s founders—Steve Dyke, Chris Jones and Rob Langley—formerly worked at The Riverside Company before branching out to hang up a shingle of their own.
OpenGate Capital Partners I, $305M
OpenGate has been in operation since 2005, to date completing roughly 40 transactions, but only closed its first institutional private equity vehicle in July. The firm has already used the fund to complete a handful of deals. OpenGate typically invests across a wide range of geographies but emphasizes the lower middle market, pursuing with particular interest corporate divestitures and carveouts.
Strattam Capital Investment Fund, $157M
Strattam was founded in 2013 by Bob Morse and Adrian Polak, two former executives at Oak Hill Capital Partners. The firm’s debut fundraising reportedly includes $48 million that will be used for LP co-investment opportunities. While many of the firms on this list invest in more nuts-and-bolts sectors like aerospace or manufacturing, Strattam emphasizes the software, digital and IT sectors, pursuing deals with companies valued between $20 million and $150 million.
Speyside Equity Fund I, $130M
Speyside Private Fund Advisers will use its first fund to invest in the specialty chemicals, industrials, metal forming and food ingredients sectors. Like AE Industrial Partners and OpenGate Capital Partners, Speyside is hardly a novice when it comes to private equity; since 2005, the firm has used its own capital to fund investments. This first effort at raising outside money was four times oversubscribed and blew away its initial target of $75 million.
For more data and analysis on private equity fundraising, you should check out our free Fundraising & Capital Overhang Report!